Lyft And Uber Want You To Carpool With Strangers

Lyft's handy for a night on the town or while you're running errands, but the ridesharing startup wants to be a more regular part of your day—twice a day, preferably.

A cheaper option for riders, Lyft Line groups multiple rides along the same route.Image courtesy of Lyft

Targeting commuters, Lyft introduced a new product in San Francisco on Wednesday. The new feature, Lyft Line, groups multiple rides along the same route. Using this carpool-like model, the company said Lyft Line will offer discounted fares that are 30% to 60% lower than a regular Lyft ride.

The announcement comes shortly after Uber previewed a similar product Tuesday night. UberPool, fares for which can be 40% cheaper than an UberX ride, is rolling out gradually in beta.

"The biggest rival to us today is public transportation," cofounder Logan Green said (perhaps this was a jab at Uber). Green, who previously served on the board of the Santa Barbara Metro Transit District, said only about 5% of the U.S. population uses public transportation every day, and the average trip takes twice as long as driving. "We're investing in that trillion-dollar opportunity that will come in years ahead," added cofounder John Zimmer.

Lyft LineImage courtesy of Lyft

With its infrastructure in place—a fleet of about 60,000 drivers in 65 cities—Lyft said it is building a new type of transportation. "Instead of public transit, we're building what we call personal transit," Green said. Leading the charge at Lyft Line is the team behind real-time transit app Rover, which Lyft quietly acquired several months ago (terms of the deal were not disclosed).

"Ninety percent of Lyfts have someone else taking the same trip within five minutes," Green said. With the updated app, people in San Francisco will see the new Lyft Line tier along with Lyft and Lyft Plus. Like a regular carpool, riders who select Lyft Line are expected to be waiting for their car at the curb to avoid delaying other parties. After commuters enter their destinations in the Lyft app, Lyft's algorithm will find other ride requests along the route for the driver.

Drivers will still be paid by distance and time, but Lyft hopes this new offering will result in longer routes, less downtime, and ultimately more money. The startup, which has waived its cut of the profits temporarily, said it will reintroduce its commission structure soon.

Up to two people in a single party can request Lyft Line, and the number of total possible passengers is capped at three. When riders select Lyft Line, the discounted price is shown up front. "We sort of bet ahead of time with each trip and set the fare based on that," he said. Even if the algorithm doesn't expect the driver to pick up other riders, the fare will, by default, be discounted by 10%. In internal tests, the company said it expects most fares to be discounted by 30% to 40%. Variable pricing will kick in during periods of high or low demand.

To promote this new tier, the company is giving people in San Francisco a free ride worth up to $25 when they use Lyft Line for the first time.